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When an Owner Comes Knocking: Preparing for a Construction Audit

Owners invest incredible resources into their construction projects. It’s only natural that they would want to safeguard their investments by conducting audits. Contractors that are expecting an audit need to be organized both on and off the construction site. Below, a Naples construction lawyer from Cotney Construction Law discusses how contractors can prepare for an audit. As with many potential issues in the construction industry, it’s best to be proactive when it comes to the condition of your project site. If you are scrambling to prepare for an audit, contact the Naples construction lawyers from Cotney Construction Law for assistance. 

What is Being Audited

An owner is mostly interested in ensuring the accuracy of financial records. Of course, anyone making an investment wants to ensure that their money is not being spent frivolously. A cautious owner may conduct an audit to not only discover potential savings but also safeguard against bribery and fraud. We’ve previously covered the prevalence of corruption in the construction industry. It is imperative that contractors do everything they can to distance themselves from this blight on the industry. 

An audit can be conducted to ascertain the condition of anything on a project site, including compliance with laws pertaining to safety, wages, and immigration. Ensuring worker safety is a big concern for owners. This isn’t entirely altruistic. An on-the-job injury is not only disturbing but also a potential source for project delays, litigation, and Occupational Safety and Health Administration (OSHA) investigations.  

When to Expect Owners 

Determining when an owner may show up will depend on a number of factors. Depending on the construction contract, an owner may show up regularly or not at all. Cost-plus contracts cover a lot of direct and indirect costs that incur over the course of a project. Since owners are on the hook for these additional construction costs, they will be more likely to conduct an audit to ensure that everything is in order. 

A lump-sum contract means that an owner is paying a fixed price for services. On the surface, an audit would seem unnecessary since everything is already paid for; however, this in no way guarantees total autonomy. Even though the owner is paying a fixed price, they may still conduct an audit to ensure that change orders are being processed accordingly. 

Of course, an owner may not show up at all. They may only rely on the looming threat of an audit to keep contractors in line. Alternatively, they could show up all the time. Beyond being prepared, you can exert control over this situation through the construction contract. As we say often, a well-drafted construction contract is your best defense in any situation. Your contract should have provisions that outline exactly how often an owner can conduct an audit. For assistance with contract drafting and reviewing, consult a Naples construction attorney from Cotney Construction Law. 

Keep Track of Your Documents 

One of the best things you can do is to document everything project-related and keep it organized and accessible. Considering the massive scope of some projects and the size of many construction companies, this may be easier said than done. If you haven’t already, we recommend investing in construction management software. In addition to providing accurate project estimates and analysis, construction management software can convert your physical paperwork into a digital copy that can be easily obtained at a moment’s notice. This can be instrumental for providing owners (and OSHA compliance officers) with what they need during an audit. 

Safety First 

As with any visitor, an owner’s safety must be made a top priority when they are visiting the worksite. Have their route on the project site planned out in advance so that hazard areas can be avoided. An owner should be with a guide at all times, and workers should be informed of their visit. Most importantly, an owner must wear the required personal protective equipment (PPE) while they are on the project site, including a hard hat, high visibility vest, closed-toed shoes, and safety glasses. 

Conduct a Rehearsal 

The best way to spotlight areas that need improvement on your project site is to have a third-party perform an audit of their own. For example, a Naples contractor lawyer can conduct a walkthrough and report their findings to you. Having an attorney conduct an audit is beneficial for ensuring that you are on-track for product delivery and compliant with all state and federal laws. Just as owners take precautions to protect their investment, you too must protect your investment by having an experienced third-party inspect your site. To be fully prepared for an owner’s audit, contact the Naples contractor lawyers from Cotney Construction Law. 

If you would like to speak with one of our Naples contractor attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.